Short-lived plans for a council sponsorship deal and a request for a payment holiday have thrust Warwickshire County Cricket Club’s finances back into the public spotlight. Graeme Brown talks to the club’s chief executive about the state of the Bears
The state of county cricket finances is that most perennial of issues – but the chief executive of Warwickshire is looking beyond pounds and pence.
In recent weeks the Post has reported on two high-profile off-field issues at the County Champions’ ground.
Last month Birmingham City Council performed an embarrassing U-turn on a sponsorship deal that would have been worth £4 million to the club over 10 years.
Weeks later it emerged the club had been forced to invoke a payment holiday on its instalments on a £20 million council loan for the redevelopment of its Pavilion End. The move had been prompted after it was revealed that it would have no international Test matches next year.
It is not the financial success story the club would have paid for following the £32 million stadium redevelopment – but chief executive Colin Povey said judging a cricket club on finances alone misses the point.
He openly admits the club will not make a top line profit this year and possibly not next year, with depreciation costs and mortgage bills from the development weighing on the balance sheet.
However, he pointed to the club’s value in reaching out to growing Asian markets, introducing youngsters to sport and hundreds of thousands of pounds worth of local community work as the operation’s real value.
The county cricket finance model struggles to stand up to scrutiny – Warwickshire make the lion’s share of their money from seven key dates a year – and England and Wales Cricket Board funding invariably makes the difference between profit and loss throughout the country.
Mr Povey said: “People can get wildly excited when you talk about public money being invested into places like this, but the city council also invests in the ICC and the NEC. The operational model is to build and attract people in, and it has worked.
“And they continue to subsidise the CBSO because they want a cultural envoy for Birmingham. We talk about bringing world class groups into this city but the truth is these events require investment to make them happen.
“If we are about being a grown-up international city these are the realities we are dealing with.”
Mr Povey said the story is the same in Lancashire and Surrey, where major investment has gone in to secure international cricket, which requires extensive broadcasting and hospitality facilities.
He said: “There is going to be huge amount of depreciation on the accounts every year.
“The real focus is on earnings before interest payments, tax, depreciation and how much cash we are generating. That has got to be enough to cover the ongoing mortgage costs and investment. That has got to be the real focus.”
He added: “You are talking about investing millions in a business that will turn over probably £12 million this year.
“The business model used to be to make a pile of cash on the Ashes and do comparatively nothing on the other years.
“Everyone gets excited about the finances around cricket but fundamentally we are not an organisation that has to give a 10 or 15 per cent return to shareholders every year – we are effectively a not-for-profit organisation.
“If we have a surplus we’d invest in the stadium or on players or in community assets.”
Mr Povey said the business plan was all about keeping an eye on the bottom line – and international cricket was the key.
Edgbaston is hosting the ICC Champions Trophy final on June 23, which is expected to attract a global audience of more than 110 million. The stadium has become the home of the Twenty20 Finals, which has become known as cricket’s equivalent of the FA Cup.
The company benefited from 40 per cent year-on-year growth in conferencing and events last year, and that part of the business will turn over more than £2 million this year.
He said focusing on cricket clubs as businesses alone short changes them. As a case in point, the club has invested £350,000 in the visitor learning centre and £327,000 a year into the Warwickshire Cricket Board this year, and supports local charities Cure Leukaemia, Lords Taverners and the Queen Elizabeth Hospital.
“Those are three things that a genuine out-and-out commercial business would put a line through once times got tough,” he added. “It is not about a quick buck, it is about a lasting legacy for the city.”
The Post revealed last month that plans for a wide-ranging sponsorship deal with Birmingham City Council – that would have seen the Edgbaston ground renamed as the City of Birmingham Edgbaston Stadium and its Twenty20 team called the Birmingham Bears – had been axed.
Hours after a document detailing proposals for a £4 million deal appeared on a council committee website, the authority’s press office issued a statement denying the document even existed – and dismissed the sponsorship out of hand.
The farce was later criticised by councillors, and Mr Povey told the Post the club remained in talks with the council, but not about the naming rights.
Mr Povey said: “The city council has been very supportive. We could not have done the regeneration of Edgbaston without the city council’s moral and financial support.
“But if they hadn’t have done that, the region’s economy would have lost £12 million this year.
“We have got a genuinely world class stadium that will bring international cricket here for generations to come. If we had lost those international revenues then we would have been left with a place we could not afford.”
The search for a naming partner for Edgbaston continues.
In February Old Trafford in Manchester agreed a £10 million, 10-year deal to rename it as Emirates Old Trafford.
Mr Povey, who worked on a sponsorship deal with Liverpool FC at former employer Carlsberg, believes the Edgbaston opportunity is worth a minimum of £5 million over 10 years.
“What I don’t want is a cheap-and-nasty three-year deal, trading away the values we want to establish,” he said.
“We have a high worth – at least £500,000 a year over 10 years.
“£400,000 a year would have been exceptional value. I have spent a lot of my time investing in sporting promotions and we can easily demonstrate that for that half a million figure there is a £1 million-plus value.
“Birmingham and Edgbaston is a very attractive proposition – you try and do a deal on Birmingham City or Aston Villa shirts for that money.”
Warwickshire made an operating loss of £668,000 last year, compared to a £327,000 profit it recorded on the previous 12 months. That came after turnover dropped from £11.7 million to £11.5 million following a rain-affected Test against West Indies as compared to a sun-blessed victory over India the previous year.
Mr Povey said the club keeps a close eye on costs, not least because county cricket clubs are subject to a salary cap, which has proven a problem for some of the Bears’ rivals in the past.
Durham fell foul of the rules in 2012 after paying less than two per cent more than their permitted level.
Mr Povey said there was an element of pressure on wages trickling down from the more lucrative terms of central contracts for international players – added to the additional pressure from the hundreds of millions of pounds being ploughed into the Indian Premier League. He said: “We are one of the lowest payers in the county cricket circuit. There will be others paying more, but we invest in longer-term contracts and support.
“We invest in rehab and prehab, and we always do a decent overseas tour every year. It is about Warwickshire being a decent place to play.”
Mr Povey said Warwickshire place a greater focus on younger players and long-term deals than many of Warwickshire’s rivals.
A total of 14 of the 24 senior players at the Bears are home-grown, and 60 per cent of the club’s academy turn professional. Two academy prospects have made their first-team debuts in recent weeks – Shoazir Ali and Pete McKay.
Despite the tough times faced by county cricket – including recent research showing all 18 counties would have made multi-million pound losses without ECB payouts – Mr Povey said there was much to be said for their businesses and the part they play in society.
Warwickshire has about 6,000 members, but attendances for county games are generally counted in the hundreds, not thousands.
However, he said while attendances are low, members tend to be loyal and remain with the club for 20 to 30 years.
He said: “Domestic cricket is a robust product. It has tinkled along for generations, and the people who love it really love it.
“The other side of that is it is a truly international game and it is the most popular sport in some of the strongest growth economies in the world, and we are in a city that is diverse and with many Asian second and third-generation families.
“The product has got real legs. We are going to have the Champions Trophy final here and the ICC says the global audience will be something like 110 million worldwide.”
Fact file: Costly sporting sponsorship deals
Football: Earlier this month Manchester United signed a £120million deal with insurance firm AON to rename its training ground.
Golf: World number two golfer Rory McIlroy’s deal with Nike is thought to be worth £155 million.
Cricket: Jaguar’s sponsorship of the England team is thought to cost about £2 million a year
Rugby: Aviva is paying £20 million over four years to associate its name with Premiership rugby.